Chapter 14 Flashcards
What were the main economic priorities in 1979?
- reduce inflation
- reduce the budget deficit
- reduce the size of the state
- reduce the power of trade unions
- discourage the market
These priorities were part of Thatcher’s economic policies aimed at transforming the British economy.
Who proposed the idea that the government should manage the economy through policies?
Keynes
John Maynard Keynes is known for his advocacy of government intervention in the economy.
What is a key belief of Friedman regarding government involvement in the economy?
Less resources in government management
Milton Friedman believed in minimal government intervention and emphasized the importance of free markets.
Fill in the blank: Friedman argued that governments should control the _______.
money supply
Controlling the money supply is a central tenet of monetarist economic theory.
What were the tax rates under Geoffrey Howe
- reduced income tax from 33% to 30%
*tax on unearned incomes 98 to 75
*higher earners 83 to 60 - vat from 8 to 12 to 15
These changes were part of Healey’s approach to taxation during his tenure.
What happened to interest rates from June 1978 to December 1978?
- increased from 12% to 17%
This spike in interest rates reflected the economic challenges of the time.
True or False: Friedman believed that government spending should be increased to stimulate the economy.
False
Friedman argued against extensive government spending as a means to boost the economy.
What is the term for the economic strategy that discourages government intervention in the market?
Monetarism
Monetarism emphasizes the role of governments in controlling the amount of money in circulation.
What does the term ‘budget deficit’ refer to?
Spending more money than coming in
A budget deficit occurs when expenses exceed revenue, leading to borrowing.
How did tax under Geoffrey Howe affect the different classes
Rich people paid less tax and poor people paid more (cost of living went up)
What is Macroeconomics?
An economic theory promoted by Milton Friedman and other Chicago school economists
What did Friedman and the Chicago school argue regarding government spending?
They argued that government spending and borrowing were key restraints on inflation
What was the state of the British economy by 1980?
The economy had plunged into a serious recession with rising unemployment
What were some monetary policies implemented in the UK during the recession?
- Government borrowing went down
- Banks denied loans
How did public spending cuts lead to issues within local councils?
Led to a series of clashes between the conservative central government and local leaders
Who was demonized as the head of the GLC?
Leaders like Ken Livingstone
What was the impact of the rate-capping policy?
Limited the amounts local councils could raise in local taxes
Lead to Sheffield and Liverpool trying to rebel by refusing to set budgets
What was a significant aspect of Thatcher’s second term?
Marked the end of the experiment with monetarism, there was not a return to demand side economics but instead more emphasis on deregulation and privatisation
What are supply-side economics focused on?
- Deregulation
- Tax cuts
- Reducing government intervention
What did demand-side economists advocate for?
- Government spending
- Keynesian principles
What was a notable economic event in the UK in 1984?
The miners’ strike
What was the trend in privatization during Thatcher’s government?
Privatization became central to the government’s economic policy
Fill in the blank: The economic theory promoted by Milton Friedman is known as _______.
monetarism
True or False: The British economy improved significantly by 1980.
False
